New Social Security Claiming Rules

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When Congress unexpectedly eliminated two Social Security claiming strategies as part of the Bipartisan Budget Act of 2015, retirement planning got a little more complicated.

What’s changing?
The provision of the budget bill called, “ Closure of Unintended Loopholes” primarily addresses two popular Social Security claiming strategies. “File and suspend” and “restricted application for a spousal benefit,” have often been used to increase cumulative Social Security income for married couples. The budget bill has eliminated these strategies for most future retirees, but you may still have time to take advantage of them, depending on your age.

If you are currently at least age 66 or will be by April 30, 2016, you may be able to use the file and suspend strategy to allow your eligible spouse or dependent child to file for benefits, while also increasing your future benefit. To file a restricted application and claim only spousal benefits at age 66, you must be at least age 62 by the end of December 2015. At the time you file, your spouse must have already claimed Social Security retirement benefits or filed and suspended benefits before the effective date of the new rules.

If you are already using the file and suspend or the restricted application strategy, you will not be affected by the new rules. You have already met the age requirements.

How are benefits for surviving spouses affected?
Rules affecting surviving spouses have not changed. If you are eligible for both a survivor benefit and a retirement benefit based on your own earnings record, you can still opt to receive one benefit first, then switch to the other higher benefit later.

What planning opportunities still exist?
Basic options for claiming Social Security remain unchanged. Currently, the earliest age at which you can receive Social Security retirement benefits is 62, but if you choose to take benefits before your full retirement age, your benefit will be permanently reduced by as much as 30%. On the other hand, if you delay receiving Social Security benefits past your full retirement age, you’ll receive delayed retirement credits, which will increase your benefit by 8% for each year you delay, up to age 70.

Determining when to file for Social Security benefits is one of the biggest financial decisions you’ll need to make as you approach retirement. It’s an individual decision that must be based on many factors, including other sources of retirement income, whether you plan to continue working, how many years you expect to spend in retirement and your income tax situation. It’s especially complicated when you’re married because you and your spouse will need to plan together, taking into account the Social Security benefits you each may be entitled to, including survivor benefits.

Although some claiming options are going away, plenty of planning opportunities remain, and you may benefit from taking the time to make an informed decision about when to file for Social Security.

 Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2016. 

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